Magna under the microscope over Daimler Chrysler

May 14, 2007

250px-cerberus-blake.jpgoleg_deripaska.jpg

Canadian firm Magna comes under renewed scrutiny as a potential bidder for Chrysler through its recent backing from Russian billionaire Oleg Deripaska. As the complex leadership story unfolds, a new suitor, Cerberus appears centre-stage.

Stop Press

The following addressed the Chrysler deal as most commentators saw it in early May. I added the last paragraph as Autoworld blogs began touting a new suitor for Chrysler. By the end of the day (Monday 14th May) the whole post appears to have been overtaken, as I cautioned:

How to make sense of it? It’s worth bearing in mind there may still be other players waiting to enter the drama. There may still be a few more twists and turns before we find out Chrysler’s fate.

The twist came sooner than I expected, with the dramatic news that US private equity firm Cerberus Capital Management is to buy a majority stake in Chrysler

The Original posting follows ..

The future of Chrysler has been the subject of increasing speculation since Dieter Zetsche, Chief executive of parent Daimler Chrysler, admitted recently that the group has started negotiations with a number of parties about its sale.

A firm mentioned as interested in acquiring Daimler is Magna. The firm is a relative newcomer, founded by an Austrian entrepreneur Frank Stronach. Mr Stronach emigrated to Canada in the 1950s, and built up a successful auto-business. One of its interesting features is its Governance structure. According to the company web-site,

In 1971 Mr. Stronach introduced his management philosophy, known as Fair Enterprise, to Magna. Fair Enterprise is based on a business Charter of Rights that predetermines the annual percentage of profits shared between employees, management, investors and society, and makes every employee a shareholder in Magna. These rights are enshrined in a governing Corporate Constitution.

Enter Oleg

There has been substantial investment by a Russian organization Basic Element, headed by Oleg Deripaska. [Photo above by A. Sazonov, from MosNews Archive]. Rated up there with Ambramovitch as one of the world’s richest individuals, Oleg dominates the Russian metals industry through his RUSAL organization.

The story was picked up by Forbes:

A Russian industrial conglomerate will sink $1.54 billion into auto parts supplier Magna International Inc., raising speculation that the Canadian company is generating cash for a bid to buy Chrysler …After the annual meeting, Magna founder and Chairman Frank Stronach said he did not think the investment would have any bearing on the company’s efforts to buy Chrysler, although he thought the Russian partner would make Magna more attractive to Chrysler’s German parent, DaimlerChrysler AG.

While Magna continues to receive attention, the Russian connection, and alleged side-deals leave some doubt that the move will be straightforward.

Leadership issues

The story is replete with leadership issues. This is partly because of the different levels at which it is playing out. Considering the parent company Daimler Chrysler with its celebrated and wealthy leader, Dieter Zetsche broadens it to a global scale. Enter a Russian entrepreneur in cahoots with a Canadian business leader. Then there is Chrysler, still a large outfit, and one of the gang of three ailing American auto-giants, with its increasingly beleaguered leader, Tom LaSorda, a former GM executive.

How to make sense of it? It’s worth bearing in mind there may still be other players waiting to enter the drama. There may still be a few more twists and turns before we find out Chrysler’s fate.


Follow

Get every new post delivered to your Inbox.

Join 1,589 other followers